CEO says Freescale on right track

SAN FRANCISCO—Freescale Semiconductor Inc. President and CEO Gregg Lowe said Thursday (April 25) that the company is moving in the right direction after reporting first quarter sales that easily beat analysts' estimates.

"While there is clearly a lot of work left, we're starting to make some solid progress," Lowe said in a conference call with analysts following the quarterly report.

In a subsequent interview with EE Times, Lowe seemed upbeat on Freescale's progress. He said he is very pleased that Freescale's employees are engaged in the company's strategy and excited about Freescale's future.

Freescale is to a large degree staking its future to the emerging Internet of Things (IoT). In interviews at the DESIGN West conference in San Jose, Calif., last week, Freescale executives highlighted the tremendous potential of the opportunity for Freescale's broad product line as IoT emerges and machine-to-machine communications flourish.

Lowe, who took the helm at Freescale in June 2012, said Freescale employees have been through a lot of ups and downs in recent years, including several rounds of layoffs. But he said he is very encouraged by the current morale and level of engagement.

Lowe said Freescale is ahead of schedule on its plan to move 90 percent of its R&D work to focused groups by 2015. Freescale said in October it would cut about 5 percent of its workforce and exit the standalone DSP business, focusing its resources on five areas: general purpose microcontrollers, digital networking processors, automotive microcontrollers, RF power amplifiers and analog/sensors.

Lowe said Thursday that Freescale has already moved 85 percent of its R&D to focus on the five product areas and expects to reach 90 percent well ahead of 2015.

Freescale (Austin, Texas) reported sales of $981 million, up 3 percent compared to the previous quarter and up 3 percent compared with the year ago quarter. Freescale's sales easily beat consensus analysts' expectations of about $960 million. The firm predicted further sales growth in the second quarter.

"The sequential improvement we generated in both revenues and gross margin is a positive step, but we still have more ahead of us to reach the level of improvement we believe we can achieve," Lowe said.

Freescale reported income from operations of $104 million for the quarter, up 86 percent compared with the previous quarter but down 38 percent from the year ago quarter. The comparison with the year-ago quarter is skewed, Freescale said, because the firm got $52 million in insurance payments in the first quarter of 2012 because its fab in Japan was heavily damaged in the 2011 Japanese earthquake.

Freescale's net loss for the first quarter was $48 million, or 19 cents per share, wider than net losses of $35 million in the previous quarter and $9 million in the first quarter of 2012.

For the second quarter, Freescale said it expects sales to increase to between $1 billion and $1.04 billion.